UK - Wendy Mayall, chief investment officer (CIO) of the Unilever pension fund, today (Oct 30) took to the witness stand in the high court to defend the Unilever Superannuation Fund’s (USF) decision to sue Merrill Lynch Investment Managers (MLIM ) for £130m (e210m) alleging negligence by Mercury Asset Management (now owned by MLIM) in the management of its assets between January 1, 1997 and March 31, 1998.

Under cross-examination by Ian Glick Q.C. – acting on behalf of MLIM, Mayall was asked to compare Mercury’s “concentrated” approach to UK equity investment with that of another of USF’s managers at the time, Schroders.

She was later also asked to clarify whether statements made at the time of the underperformance implied that for Mercury to beat its benchmark was “a stretching target”.

Glick read out a statement attributed to Mayall, stating: " We recommend the managers are set the target of beating the benchmark return net of all management fees.
“That is the recommendation. The benchmark return itself
should be calculated quarterly based on the strategic
allocation. This target is stretching for two reasons ..."

Mayall replied: “I can only say what I understand was being dealt with here. I understand that what it was doing was just
acknowledging, in a rough and approximate form that some
extra return would have to be delivered by an active manager.”

In its defence of the case, MLIM claims that targets set by the fund were understood by USF as targets and not guarantees and that they would sometimes be underperformed and sometimes outperformed. MLIM adds its belief that the concentrated style of Mercury’s UK equity portfolio management was understood by USF and that beating the benchmark, let alone outperforming it by 1%, was a “stretching” target.

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